3rd October 2014
The rules around intestacy are being updated but unmarried couples are still not being recognised and individuals who die without a will run the risk of leaving their partner without financial support.
From this month changes to the rules of intestacy –where a person dies without leaving a will – will be simplified to make it easier to distribute a person’s estate to their spouse or civil partner in the event of death.
However, the current rules, which have been in place for nearly 90 years, have not been updated to reflect the number of people living together who are unmarried or not in civil partnerships. Despite what many people believe there is no such thing as a ‘common law spouse’ and couples who live together do not have the same rights as married couples, no matter how long they have been together.
This means that in the event of death a partner, whether that be a long-standing boyfriend or girlfriend, are not recognised under the intestacy rules.
Ian Taunt, tax planning technical manager at Wesleyan, said: ‘The new rules reflect more closely what most people would expect to happen if they or their spouse or civil partner died without a will. However, no changes have yet been made to recognise the rights of common law partners, those who live together as a couple but who aren’t married or in a civil partnership.’
The fact that long-term partners may have children or joint financial obligations makes little difference to their entitlements to a partner’s estates in the event of death.
‘For those left in the position where a partner dies without a will, the only real option is to make an application to the court for financial provision out of the deceased’s estate on the grounds that they haven’t been adequately provided for,’ said Taunt. ‘All of this comes as a surprise for many couples.’
Taunt said unmarried couples should put a will in place to ensure their estate goes where they want it to, who executes their will, and who looks after their children, and additionally drawing up a will is also an opportunity to consider inheritance tax (IHT) planning.
‘Writing a will also gives you a chance to review your estate and consider any IHT implications,’ he said. ‘Increasing numbers of people are failing liable to IHT as property values continue to rise and with the nil rate band remaining at £325,000 since 2009. Although married couples and civil partners can share nil rate bands – meaning they have £650,000 in assets before paying IHT – anything over this is generally taxed at 40%.
‘Yet IHT is one of the few taxes where careful planning, perhaps using trusts and gifts, can help significantly reduce your potential liability.’
Under the new intestacy rules, spouses and civil partners where they are no children will receive all of the estate of their deceased partner whereas before they received the first £450,000 and the rest of estate was divided between blood relatives.
Where there are children involved, under the new rules the spouse of the deceased received the first £250,000 and a life interest in half of the remainder, with the children splitting the other half. Under the new rules, the life interest is scrapped and the surviving spouse or civil partner received £250,000 plus half of the remainder and the children will receive the other half but only when they are 18.